Toll Brothers, Inc. · NYSE:TOL
Toll Brothers — Q2 2022 Earnings Presentation
55 slides from Toll Brothers's earnings presentation, Apr 30, 2022
Slide 1: Company Overview
Slide 2: Forward-looking statements
Information presented herein for the second quarter ended April 30, 2022 is subject to finalization of the Company's regulatory filings, related financial and accounting reporting procedures and external auditor procedures. This presentation contains or may contain forward-looking statements within
Slide 3: Table of Contents
EXECUTIVE SUMMARY DIVERSE PRODUCT MIX POSITIONED FOR FINANCIALS 1. Company Overview 16. Product Diversification GROWTH 49. Debt Maturity Profile 2. Forward-looking Statement 17. Leadership in the Luxury Market 39, The Toll Brothers Advantage 50. Strong Bank and Capital 3. Table of Contents 22. Affor
Slide 4: Toll Brothers is America's Luxury Home Builder
TOLL BROTHERS IS AMERICA’S LUXURY HOME BUILDER LEGACY & LEADERSHIP Founded in 1967, NYSE-listed (TOL) in 1986 5th Largest U.S. homebuilder by revenues A Fortune 500 builder in 24 states & 60+ markets - 10 new markets since 2018 Positioned for growth with greatest product diversification in the indus
Slide 5: The Dominant Player With Few Competitors In The Luxury Home Market
The Dominant Player With Few Competitors In The Luxury Home Market * Nationally-recognized, award-winning brand * Our build-to-order model meets the needs of buyers who have the desire & means to personalize their homes + Luxury communities in desirable locations in both high-growth & high barrier-t
Slide 6: Quarter and FY Results
3 Months Ended April 30, Fiscal Year Ended October 31, 2022 2021 % Change 2021 2020 % Change Contracts Units 2,874 3,487 (17.6%) 12,472 9,932 25.6% Dollars $3,090 $3.053 1.2% $11,540 $7,995 44.3% Backlog Units 11,768 10,104 16.5% 10,302 7791 32.2% Dollars $11,706 $8,690 34.7% $9,499 $6,375 49.0% Del
Slide 7: Key Financial Metrics
| FY 2016 7 | FY 2018 | FY 2019 | FY FY 2022 Pre-tax Income (000s) $589,027 $814,311 $933,916 $787,170 $586,901 $1,100,315 $295,815 EBITDA (000s) $773,628 $1,017,227 $1,153,669 $1,046,151 $838,032 $1,369,626 $355,713 Diluted EPS $2.18 $3.17 $4.85 $4.03 $3.40 $6.63 $1.85 Cash & Marketable Securities
Slide 8: Strong Performance
STRONG PERFORMANCE Q2 2022 contracts up 1% in dollars, & down 18% in units; highest dollars ever Q2 2022 settlements up 19% in dollars, & up 6% in units; both the highest Q2 ever Q2 2022 backlog up 35% in dollars, & up 17% in units; both the highest ever Expect 9% community count growth in FY 2022 t
Slide 9: Factors Driving Demand
ACADIA RIDGE I/LAS FACTORS DRIVING DEMAND + Release of pent-up demand * Constrained supply of new & resale homes on the market * Home price appreciation in existing homes for our buyers * Toll buyers have benefited from solid stock market / employment outlook + Surge of Millennials purchasing first
Slide 10: National Footprint Positions Toll Brothers for Growth
NATIONAL FOOTPRINT POSITIONS 24 STATES TOLL BROTHERS FOR GROWTH 60+ MARKETS Total: 328 As of April 30, 2022
Slide 11: Geographically Diversified Portfolio
GEOGRAPHICALLY DIVERSIFIED PORTFOLIO FYE 2021 FYE 2021 LOTS CONTROLLED REVENUE (TOTAL = 80,867) (TOTAL = $8.431BN) North Mid-Atlantic South Mountain = Pacific City Living VIRIDIAN | TX
Slide 12: Builder Acquisitions
IN ADDITION TO STARTING MULTIPLE DE NOVO DIVISIONS, WE HAVE ACCELERATED OUR EXPANSION THROUGH ACQUISITIONS. Rialto Homes San Antonio, Texas 2022 StoryBook Homes Las Vegas, Nevada 2021 Keller Homes Colorado Springs, Colorado 2020 Thrive Residential Nashville, Tennessee & Atlanta, Georgia 2020 Sabal H
Slide 13: Land Acquisition and Development
LAND ACQUISITION * Control 85,840 home sites * Reduced land owned vs optioned; From 62/38% at FYE 2019 to 47/53% at Q2 2022 + Use land banking, JVs, staged/structural takedowns & seller financing + We operate in the most difficult land approval markets in U.S. - once you get it approved, it’s gold!
Slide 14: Growing Percentage of Lots Optioned vs. Owned
GROWING PERCENTAGE OF LOTS OPTIONED VS. OWNED (AT FYE) 85,840 80,867 48,628 47,167 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q2 2022 Mm Owned mmm Optioned Avg. Owned
Slide 15: Strong Buyer Profile
Toll Brothers STRONG BUYER PROFILE (Toll Brothers IN Q@2 2022, 51% OF BUYERS CHOSE TOLL BROTHERS MORTGAGE COMPANY, IN-HOUSE LENDER EXCLUSIVE TO TOLL BROTHERS CUSTOMERS, OFFERING EXCEPTIONAL EXPERIENCE & OPERATIONAL BENEFITS IN MANAGING BACKLOG THROUGH CLOSING. 18% % of Total Settlements _Incl.Cash E
Slide 16: Greatest Product Diversification in the Industry
GREATEST PRODUCT DIVERSIFICATION IN THE INDUSTRY + Entry-Level ° Affordable Luxury * Luxury Move-Up * Active Adult * Urban Infill * Urban Redevelopment * Large-Scale Master Plans * High-Rise Urban Condos * Suburban High-Density + Urban & Suburban Rental * Student Housing Rental * Single-Family Renta
Slide 17: Leadership in the Luxury Market
LEADERSHIP IN THE LUXURY MARKET TOLL BROTHERS IS THE ONLY NATIONAL HOMEBUILDER FOCUSED ON THE LUXURY MARKET. OUR MAIN COMPETITORS ARE SMALL PRIVATE BUILDERS, NOT THE LARGER PUBLIC HOMEBUILDERS. AVERAGE DELIVERED PRICE $875 $639 $524 $447 $463 $387 $402,-—=««s«$402-«« $420 $420 $425 $43 $323 $276 LGI
Slide 18: Bridle Ranch, Scottsdale AZ
lea Toll Brothers BRIDLE RANCH SDALE, AZ 18
Slide 19: Edge on Hudson, Sleepy Hollow NY
Slide 20: Mesa Ridge, Las Vegas NV
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Slide 22: Increased Focus on Affordable Luxury
INCREASED FOCUS ON AFFORDABLE LUXURY TOLL BROTHERS COMMUNITY COUNT BY BUYER SEGMENT 48% 43% 43% 40% 38% 20% : } i i 39% | i) Affordable Luxury Luxury Age Targeted / Empty Nester FY 2019 m@FY2020 mFY2021 mQ2FY 2022
Slide 23: Bartram Ranch, St. Johns FL
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Slide 25: Abaco Point, Naples FL
Slide 26: Toll Brothers at Cadence, Scottsdale AZ
Slide 27: Active Adult Market: Regency by Toll Brothers
* National Regency brand name in 55+ Active Adult/Empty Nester Market * Established presence in 18 states & growing R E G E N CY * Control -18,800 (8,200 owned / 10,600 optioned) lots for Active BY TOLL BROTHERS Adult/Empty Nester communities * Baby Boomers making their next home move Note: Data as
Slide 28: Regency at Montaine, Englewood CO
Toll Brothers “REGENCY AT MONTAINE | ENGLEWOOD, CO
Slide 29: Preserve at Emerald Pines, Methuen MA
Slide 30: Regency at Palisades, Charlotte NC
Slide 31: Regency
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Slide 32: The Carlisle, Loudoun Valley, Ashburn VA
ht Go) 0 jn ah a THE CARLISLE | LOUDOUN VALLEY | ASHBURN, VA
Slide 33: Successful Urban Track Record
SUCCESSFUL URBAN TRACK RECORD * Formed in 2003 to leverage luxury brand in urban market * Completed construction on 45 buildings totaling ~7,200 units BRAND EXPERIENCE * Currently selling communities in New York City & New Jersey’s Gold Coast * Land in Metro New York City & Philadelphia * Joint vent
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Slide 36: Toll Brothers Apartment Living
itt nee were glee W wee | COMPLEMENTS FOR-SALE BUSINESS + Building on Toll Brothers brand name * Income generated from operations, fees, gains on sale or refinancing * Combine premier locations with luxury, for-sale finishes, services, & amenities in urban & suburban markets BROAD EXPERIENCE + Named
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Slide 38: Apartment Living Pipeline
oer pesos Pare Westborough, 249 Unis APARTMENT LIVING et Metro New York City / New Jersey The Bradford, 112 Units Kensington Place, 400 Units Emblem 120, 289 Units PIPELINE Pare Princeton, 252 Uns Treen cos Unts The Mews at Princeton Hathon, 190 Units Junction, 636 Units ‘Atwood, 300 Units The Morga
Slide 39: The Toll Brothers Advantage
UNRIVALED CHOICE * Highly personalized & hands-on Design Studio experience guided by a professional design consultant * Selections from premium products, state-of-the-art appliances, & luxury fixtures & finishes PRESTIGIOUS LOCATIONS * Toll Brothers builds communities in the heart of where people wa
Slide 40: Toll Brothers Design Studios
= = TOLL BROTHERS DESIGN STUDI ~— DANBURY, CT Build-to-Order model provides unrivaled choice for our home buyers 80% of homes are pre-sold build-to-order, 20% spec We operate 35 Toll Brothers Design Studios, a retail-like space where buyers choose both structural & finishing options Our buyers incre
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Slide 42: Highest Ranking Selling Communities in Submarket Desirability Index
HIGHEST RANKING SELLING COMMUNITIES IN ‘SUBMARKET DESIRABILITY INDEX’ 3.06 2.83 276 a 6g 259 257 254 252 2.32. 2.29. 218 214 2.08 1.96 1.50 TOL MHO TMHC PHM LEN TPH HOV MTH KBH ZH CCS DHI MDC NVR LGIH mmm Score Average The weighted average Submarket Desirability Index is the proprietary measurement
Slide 43: Operational Efficiencies Through Innovation
TOLL INTEGRATED SYSTEMS PANEL & TRUSS PLANT + Manufactures & distributes panels, trusses, trim, doors, millwork, & windows + — Provides Turnkey Framing Services to 5 states (7 Divisions) + Supplied components for 32% of our homes in FY 2021 + — Improves timeline & quality; reduces costs, waste, & de
Slide 44: Environmental, Social and Governance
* — Inaugural report released April 19, 2021 * — Utilizes industry-specific standards from the Sustainability Accounting Standards Board (SASB) * Benchmarks efforts on a range of environmental, social & governance matters * — Visit the report at TollBrothers.com/ESG As an industry, home builders hav
Slide 45: U.S. Housing Market
WHERE IS THE MARKET NOW DEMAND EQUATION Continued population growth Household formations are strong From 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household- formation growth and replace obsolete units (WSJ) * Homeownership rate rising, but still bel
Slide 46: Key Market Trends Favor Toll Brothers
KEY MARKET TRENDS FAVOR TOLL BROTHERS MARKET TRENDS Millennials are now buying their first homes Baby Boomers consider their next move: the home they want to retire in, asecond home, or a multi-generational living option Economy & population growth in the Southeast, Texas, Mountain States, West; Job
Slide 47: Industry Is Undersupplied as Demand Increases
Households (000) INDUSTRY IS UNDERSUPPLIED AS DEMAND INCREASES HOUSING STARTS HAVE NOT KEPT PACE WITH HOUSEHOLD GROWTH 1970-1979 1980-1989 1990-1999 2000-2007 2008-2021 Average Annual Average Annual Average Annual Average Annual Average Annual Housing Starts Housing Starts Housing Starts Housing Sta
Slide 48: Increased Focus on Capital Efficiency & Return on Equity
THE CANYONS Alte PORTER RAN 4 poe BORTER RANCH LAND PURCHASING: REDUCE OWNED LAND * Structuring land acquisitions more efficiently * Option more land as a % of total * Increased use of staged/structured takedowns, as well as seller financing + Use third-party land banking & JVs * Controlling more la
Slide 49: Debt Maturity Profile
As of April 30, 2022 Cash & Equivalents $0.54BN Fitch Inc. BBB- (Positive) Revolver Availability $1.82BN Standard & Poor’s BB+ (Positive) Moody’s Baa3_ (Stable) TOTAL LIQUIDITY $2.36BN so [Ey so so so B FY 2022 2023 2024 2025 2026 2027 2028 2029 2030 m Public Debt (Senior) = Bank Debt* “Bank debt in
Slide 50: Strong Bank and Capital Market Relationships
First Huntingdon Finance Corp. Toll Brothers Finance Corp. $1.905 BN Revolving Credit Facility $650 MM Term Loan Due November 2026+ Due November 2026 Commitment Commitment Series Coupon Principal Maturity (yrs) Citi $125MM —Truist $102 MM Bank of America $125MM_ — SMBC $102 MM Goldman Sachs $125MM W
Slide 51: Book Value Per Share
$15.36 $15.61 $18.51 $19.68 $22.02 $24.15 $26.14 $28.82 $32.57 $35.99 $38.53 $44.08 $46.51
Slide 52: Net Debt-To-Capital
Net Debt-To-Capital 2000-2021 (FYE) 48.0% 45.8% ” 46.0% 40.7% AIX 39 50, 40.9% 35.5% 34.5% 31.7% 32.3% ° 33.2% 32.9% 33.3% 27.4% 26.7% , - 1% 233% 25.1% 12.5% 13.3% 14.8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Note: Net-debt-to-c
Slide 53: Stock Repurchase Summary
Dividends (Total $/ Share Shares ost yAveragelErice Quarterly Per Share) Authorizations 2022 5,218,532 $292MM $56.08 $44MM/$0.20 =e Q2 2,205,172 $107MM $48.30 $23MM/$0.20 o> Qi 5,013,360 $186MM $61.65 $2IMM/$0.17 — 2021 7,421,423 $378MM $50.97 $77MM/$0.17 a= 2020 15,951,855 $634MM $39.75 $57MM/$0.11
Slide 54: Adjusted Gross Margin & EBITDA
ADJUSTED GROSS MARGIN & EBITDA 20 2016 2017 2018 2019 2020 2021 2022 Revenues - home sales 4,171,248 5,169,508. 5,815,058 7,143,258 7,080,379 6,937,357 8,431,746 2,186,529 Cost of Revenues 3,190,957 4,047,615 4,448,452 5,536,812 5,534,217 5,534,103 6,528,454 1,659,265 Gross Margin 980,291 1,121,893
Slide 55: Net Debt-To-Capital
NET DEBT-TO-CAPITAL 2009 2010 2011 2012 2013 201 2015 20 2017 2018 201¢ 2020 2021 __Q2 202 Loans payable 472,854 94,491 106,556. 99,817 107,222 652,619 1,000,439 871,079 637,416 686,801 11,449 _1,147,955__1,011,534 1,196,415 Senior notes 1,578,212 1,536,005 1,484,204 2,065,334 _2,305,765 _ 2,638,241